Constructing a Region DSGE Model with Institutional Features of Territorial Development
Round 1
Reviewer 1 Report
Dear Authors,
Please find below and attached my comments and suggestions for your work.
Good luck!
Kind regards,
The Reviewer
Review Report Form
Journal: Computation (ISSN 2079-3197)
Manuscript ID: computation-1751126
Type: Article
Title: Constructing a Region DSGE Model with Institutional Features of Territorial Development
Authors: Julia Dubrovskaya * , Dmitriy Shults , Elena Kozonogova
Submission Date: 16 May 2022
Dear Authors,
I have carefully analyzed your article entitled “Constructing a Region DSGE Model with Institutional Features of Territorial Development”.
Congratulations for your work and valuable insights reflected in the content of the manuscript!
The structure of my Review Report Form takes into consideration two sections, namely: (A.) General overview of the article and strong points; and (B) Suggestions meant to improve your current manuscript.
(A.) General overview of the article and strong points:
Ø General background of the study: The authors have mentioned that this paper presents a mathematical statement of the problem connected with studying socio-economic processes at the level of the regional economy using the DSGE model, which includes the following sectors of the economy: the central bank (at the macro level), pursuing an inflation targeting policy, enterprises, households, the state (regional authorities), external world. What is more, the authors have noted that a feature of the proposed model is the consideration of territorial features through budget expenditures on digitalization of such areas of human capital formation as healthcare and education.
Ø Aim of the study: The authors have chosen this topic due to the importance of this current approach, noting that the high importance of these costs became evident during the COVID crisis, when the consequences of underfunding IT costs in education and healthcare in a number of countries and regions led to the inability to receive educational services, lagging behind in the provision of high-tech medical care and vaccine development, and, ultimately, slowing economic growth and increasing uneven development. In like manner, the authors have allocated health and education expenses in the standard budget limit of the regional government.
Ø Results of the study: The authors have shown in their study the fact that their growth is manifested, firstly, on the production function of the territory by destabilizing the labor market through sick people, and, secondly, on the balance of the budget of the regional government due to the displacement of other budget expenditures. On the basis of the developed model, response functions for shocks of exogenous variables for 20 periods were built (scenario - redistribution of budgetary funds in favor of healthcare and education). The reallocation of budget funds in favor of healthcare increases the number of active households. This, in turn, stimulates labor supply and consumption. And the redistribution of budgetary funds in favor of education increases total factor productivity. The result of the simulation is the response functions of endogenous variables in response to the fading growth in the share of spending on human capital in the region, as well as the obtained values of elasticity for a single change in shocks. The theoretical significance of the proposed DSGE model lies in taking into account the institutional features of the constituent entities of the Russian Federation by highlighting the public sector in the model, which includes the differentiation of spending on health care, education, and public procurement. The practical significance lies in increasing the adequacy of the model to the modern realities reflected in the functioning of the national economy as a set of heterogeneous regions.
(B) Suggestions meant to improve your current manuscript:
Distinguished Authors I would kindly like to suggest the following aspects:
(1.) Closely analyzing the article, since there are some English language improvements and slight corrections that need to be taken care of. Thus, my recommendation would be to carefully proofread the entire manuscript.
(2.) Also, I have closely analyzed the format of the article, in order to check whether it follows the guidelines which are specific to the publisher. Thus, I have noticed that the current form of your work needs improvement in this regard. So, my kind suggestion is to closely analyze again the guidelines belonging to the publisher, since the article should fit exactly the publisher’s guidelines. For instance, the keywords, the subsections, the references, currently do not fit the style and the requirements of the publisher. Also, it would be highly recommendable to include in the abstract of your study more highly relevant details that refer to the research objectives and the methodology used. This would definitely be considered a plus for your scientific work.
(3.) In continuation, the suggestion would also be inserting in your article a few ideas concerning the correlation between effects of the COVID-19 pandemic and the COVID-19 global crisis, sustainability and sustainability assessment, Sustainable Development Goals, while focusing on constructing a region DSGE Model with institutional features of territorial development, since these are key focuses these days. In this context, I had the chance to read a few interesting scientific works recently, among which I would like to mention: Measuring Progress Towards the Sustainable Development Goals: Creativity, Intellectual Capital, and Innovation. In C. Popescu (Eds.), Handbook of Research on Novel Practices and Current Successes in Achieving the Sustainable Development Goals (pp. 125-136). IGI Global. https://doi.org/10.4018/978-1-7998-8426-2.ch006; OECD. Measuring the Impacts of Business on Well-Being and Sustainability. https://www.oecd.org/statistics/Measuring-impacts-of-business-on-well-being.pdf; OECD. 2022. Toward sustainable economic development through promoting and enabling responsible business conduct. https://www.oecd-ilibrary.org/sites/f7813858-en/index.html?itemId=/content/component/f7813858-en.
Dear Authors, congratulations once again for your work and valuable insights reflected in the content of the manuscript, and I hope my comments will be of value to you!
Kind regards,
The Reviewer
Comments for author File: 
Comments.pdf
Author Response
We are grateful to the referee for a thorough reading of our paper. We have taken into account all comments. Changes that have been made to the manuscript are marked in yellow.
Author Response File: 
Author Response.docx
Reviewer 2 Report
I appreciate the chance to serve as a reviewer on this paper. The paper is well written and suits the scope of the issue. I believe that the paper could be of interest to an international audience since it deals with a very interesting topic. I recommend accepting the paper after minor revisions, so I urge the author(s) to consider the following comments and improve the paper accordingly.
1. How the authors manage asymmetric adjustment behavior?
2. What are the economic effects by these results for the countries (see for instance Tsagkanos, 2017).
1. 3. It would also be useful for the audience and future researchers if a guide for the future research is provided: how this research could be used concretely to open new pathways? Is it possible to provide some examples and possible directions for future research?
Literature
Tsagkanos G. A., (2017). Stock Market Development and Income Inequality. Journal of Economic Studies. Vol 44(1), 87 – 98.
Author Response
We are grateful to the referee for a thorough reading of our paper. We have taken into account all comments. Changes that have been made to the manuscript are marked in yellow. In addition, as an additional clarification, we would like to note the following: in the current version of the model, completely homogeneous regions are considered; accordingly, there is no asymmetry in the flows of goods and factors of production. But in prospect studies, when the model will describe the interaction of specific regions in the context of their heterogeneity, this aspect will certainly have to be taken into account.
Author Response File: Author Response.docx
This manuscript is a resubmission of an earlier submission. The following is a list of the peer review reports and author responses from that submission.
Round 1
Reviewer 1 Report
The work builds a DSGE model of regional economy referred to the Russian economy by highlighting the role of healthcare expenditure and human capital.
Beyond the analytical formalization, the main flaw I see in the work lies in the lack of a clear motivation: what is the research question?
Starting from the abstract, and then continuing with the introduction, the authors focus on details relating to the model but do not clarify 1) the reasons that lead them to the development of their research strategy 2) how they relate to the (vast) economic literature on regional based DSGE models.
The results are limited to commenting on the impulse response functions, but mostly appear to be a simple numerical exercise without clarifying the links between the endogenous variables.
Reviewer 2 Report
Report on “Constructing a Region DSGE Model with Institutional Features of Territorial Development” submitted to AIMS Mathematics, special issue “Digital Transformation: Instrumental and Mathematical Methods and Models”
The article presents an extension of a standard DSGE (Dynamic Stochastic General Equilibrium) model to a multiregional model. In a synthetic way, the contribution of the article is to discuss the stability conditions in a model with more than one region, and to carry out a calibration of the model for the Russian Economy.
Although the mathematics involved in DSGE models is interesting, I do not see the article as a relevant mathematical contribution for a publication in AIMS Mathematics, and especially the relation to the theme of the special issue to which the article was submitted.
The main discussion of the model, about the stability of the multiregional model, is not analyzed rigorously in the model, only an intuitive and non-formalized analysis of the problem is discussed (lines 190-210). There is no formal discussion about the stability of the model, in the line, for example, of the range of parameter values ​​where the economy is stable or unstable.
The author's contribution is to build the global model as a sum/aggregation of regional models, which is the usual approach in the DSGE literature aggregating agents, in which case heterogeneity is constructed assuming that the agents are regions of the economy. So, I don't see an original contribution in the work.
There are also points in the motivation of the article that are lost in the analysis, such as the issue of human capital and heterogeneity in access to health. Although they are topics of interest, the article does not develop these questions in a detailed or mathematical way.
The final part of the article is an empirical analysis, based on a calibration process, for the Russian Economy. Although calibration is usual in this literature, in a regional model the calibration process is much more complex since normally the parameters are taken from countries and not regions, which would require a more detailed calibration process or econometric estimation.
So, I don't see a relevant method contribution in the submitted work, and in general in the current format the work is far from the mathematical rigor required in AIMS Mathematics. So unfortunately my recommendation is to reject the article.
